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2009 – the fall of the US dollar, the rise of the Japanese Yen

Posted by Adrian on December 12, 2008

The US dollar in the last 4 months towards the end of 2008 has been a great hedge. Especially against the commodity producing country currencies and the EURO. But it’s time, albeit short rise (after some heavy selling in early 2008 ) is finishing, in fact you could say it will be the end of the US dollar (as a base currency).

At some point in 2009, the US dollar will crash hard. As the world will go further into a severe economic slump. Unfortunately the money printing and ‘bailout packages will cease to have any effect of the markets (except causing the USD to collapse ), as company earnings will be very disappointing throughout 2009 and the coming US dollar sell off will effect global equity markets.

The US dollar decline into 2009 will also include the EURO. At the time with relative strength of the US dollar up to December 2008, the EURO was sold off. From highs of 1.48 ( 22nd September 2008), to lows of 1.23 (27th October 2008). With the USD now showing weakness the EURO has made some gains, refer to graph (click for larger image):

EURO now at 1.33


I think the EURO rally is short term, which will also see weakness in 2009, but with the USD sell off imminent; the EURO may stablise in a flat range. With EURO coming under pressure, more so against the Japanese YEN.

The Japanese YEN will rise significantly through out 2009, as most global currencies will get dumped, more particularly the USD.

Note on the USD index, USD/JPY graph, the comparative sell off of the USD index and the USD against the JPY – from March 2004 to December 2004. Then in September 2005 the USD index broke aware from paring with the USD/JPY (refer to graph, click for larger image), to go to highs of 124.00 USD. Now crashed to 91.51 against the Yen (as at 11/12/2008).

USD index, USD/JPY graph


With USD now dropping off it’s highs 88.46 (21st November 2008), now 83.28 (11th December 2008).

It is very possible we are going to see both the USD index and the USD/JPY parity in collapse (as it did early in 2004), as USD positions will close off towards the end of 2008 into 2009. There is going to be a definite sell on the USD right into 2009.


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